Part 1

Instructions

Answer the following questions and complete the following problems, as applicable. Unless otherwise directed, assume annual compounding periods in computational problems.

You may solve the following problems algebraically, or you may use a financial calculator or Excel spreadsheet. If you choose to solve the problems algebraically, be sure to show your computations. If you use a financial calculator, show your input values. If you use an Excel spreadsheet, show your input values and formulas.

Note: In addition to your solution to each computational problem, you must show the supporting work leading to your solution to receive credit for your answer.

1. “List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive” (Cornett, Adair, and Nofsinger, 2014, p. 91)?
2. “How are the present value and future value related” (Cornett, Adair, &Nofsinger, 2014, p. 91)?
3. “How are present values affected by changes in interest rates” (Cornett, Adair, &Nofsinger, 2014, p. 91)?
4. “How much would be in your savings account in eight years after depositing $150 today, if the bank pays 7 percent per year” (Cornett, Adair, &Nofsinger, 2014)?

• Recalculate the savings account balance, using a 6 percent interest rate, and again, using an 8 percent interest rate.

• Recalculate the present value, using an 11-percent discount rate, and again, using a 13-percent discount rate.

• Recalculate the rate of return, assuming the growth occurred in four years, and again, assuming the growth occurred in six years.

• Recalculate the future value at 8 percent interest, and again, at 10 percent interest.

• Recalculate the present value at 9 percent interest, and again, at 11 percent interest.